Counting heavy fine by Sonali Bank subsidiary

Dhaka,  Wed,  07 December 2016
Published : 16 Oct 2016, 22:50:29
Editorial

Counting heavy fine by Sonali Bank subsidiary

The government should realise the fact that state-owned banks have become more of a burden than an asset. If the current state of affairs is allowed to continue, the government would be left with no option other than infusing capital into them recurrently
 

The state-owned Sonali Bank is, as the latest development indicates, still unable to come out of the bad patch. It has lost funds worth billions of takas in the Hall-Mark scam. Since the size of the classified loans is very large, it has taken a heavy toll on the bank's financial health. The bank now desperately needs large capital transfusion. What is worse is that the bank, as is the case with other public sector entities, is suffering from an image crisis of serious nature. The government has been trying to repair the damage within its limited means ever since the Hall-Mark scam had hit the bank. However, the bank has lately suffered yet another shock which has come from none other than its subsidiary, the Sonali Bank (UK) limited.

The Financial Conduct Authority (FCA) of the UK last week slapped a fine of £3.2 million on the largely government-owned bank for money laundering offences. So, the government, being the owner of 51 per cent stake of the Sonali Bank (UK), can hardly escape the ignominy. The subsidiary, allegedly, maintained transactions in favour of politically exposed persons (PEPs) without doing adequate due diligence, and also transferred suspicious money from its branches. In addition to levying fines, the FCA has barred the bank from accepting deposits from new customers for 24 weeks. The FCA observations about the bank's operations were also very damaging. The regulator has found that serious and systemic weaknesses have affected almost all levels of its anti-money laundering control and governance structure, its senior management team, money laundering reporting responsibility, oversight of branches and adherence to anti-money laundering policies.

 Mismanagement and propensity to ignore laws and rules by a section of officials undeniably have deeply hurt the Sonali Bank. It is unfortunate that the same operational weaknesses have found their way into its subsidiary, that too in a distant land. The management of banks and other financial institutions in Bangladesh can get away with lapses, deliberate or otherwise. But that is not possible in developed countries that are very particular about compliance issues concerning financial institutions. Thus, non-compliance has resulted in the imposition of a heavy fine that must be paid in full by 26th of the current month. Finance Minister AMA Muhith is aware of the developments surrounding the Sonali Bank (UK) and he has promised probe and actions.

One cannot but keep one's fingers crossed hoping that there would be appropriate actions against the officials responsible for gross operational lapses in the UK Sonali Bank. Speaking candidly, the performance of the public sector banks  has worsened gradually due to lack of proper actions on the part of the regulator and the owner (government) against the officials and all relevant others. The government should realise the fact that state-owned banks have become more of a burden than an asset. If the current state of affairs is allowed to continue, the government would be left with no option other than infusing capital into them recurrently. So, a solution to this chronic problem should be found without any further delay.

 
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Editor : A.H.M Moazzem Hossain
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